BlackRock (BLK), the world's largest asset manager, is reportedly nearing a $12 billion acquisition of HPS Investment Partners, a firm specializing in lending to high-risk companies. This move would position BlackRock firmly within the booming private credit market, which has gained traction due to rising interest rates and regulatory pressures on traditional banks.
The potential deal could be announced as soon as this week, according to sources from the Financial Times and Bloomberg. However, the agreement remains subject to change. Following the news, BlackRock's stock saw a slight decline in early trading on Monday.
The private credit market has expanded significantly over the past decade, growing from $41 billion in 2000 to a current valuation of $1.6 trillion, as reported by Preqin. Despite this growth, it still pales in comparison to the total loans held by U.S. banks, which exceed $12 trillion. BlackRock, managing $11.5 trillion in assets, is among several financial giants aggressively pursuing opportunities in this sector.
In a similar vein, Citigroup (C) and Apollo Global Management (APO) recently announced a $25 billion private equity fund focused on direct lending, marking a significant collaboration between a major bank and a private equity firm. This partnership highlights the competitive landscape as firms seek to capitalize on the lucrative private credit market.
However, the rise of private debt has raised concerns among industry leaders. JPMorgan CEO Jamie Dimon has warned that the growth of this sector could lead to increased risks outside the regulated banking system. He expressed apprehension about potential problems arising from retail investors facing significant losses in these funds.
If BlackRock finalizes the acquisition of HPS, it would mark its third major acquisition in 2024, reflecting a strategic shift towards diversifying its asset portfolio. Earlier this year, BlackRock announced plans to acquire London-based data provider Preqin for $3.2 billion and private equity firm Global Infrastructure Partners for $12 billion. The latter deal, which closed in October, was aimed at tapping into the rising demand for new energy, transportation, and digital infrastructure projects.
Acquiring HPS would further enhance BlackRock's capabilities in the private equity market, allowing it to better compete in this rapidly evolving financial landscape. As the firm continues to expand its reach into private markets, it remains to be seen how these strategic moves will impact its overall business and the broader financial ecosystem.
